Required reading regarding your financial future

Thanks to Andrew Sullivan for posting Michael Kinsleys challenge to
President Bush’s desire to privatize Social Security. I personally couldnt think of anything more threatening to our future, or more likely to cause economic calamity of the highest order.

Before I post Mr Kinsleys challenge, let me define my fear, and some anecdotal evidence to support that fear.

The Presidents plan in simplistic terms, is to allow all of us taxpayers to take a small portion of our social
security contributions and invest that money as we see fit. The premise is that by investing in things that the
Social Security Fund cant , each of us can earn greater returns and better protect our financial future.


Of course, with the search for greater returns, comes greater risk. Now I always thought that the Social Security program itself was designed to protect us from ourselves. That those of us who might be able to save, didn’t save enough to protect us at retirement, and those of us who were never in a position to save, had a fallback that we as a nation all contributed to.

Along comes the Presidents proposal which kind of flips the logic. Now the admission is no longer that we as
individuals can no longer save money, its that we as a country can no longer save money. Our politicianswho
might have been able to save moneyin better times, didnt. As a result, as a country it appears that we
will be unable to meet our future obligations for Social Security.

Rather than shaving off all the pork we feed our politicians, and beyond in order to create funding to meet our
obligation, the President has decided to relinquish part of the obligation back to us, in hopes that each of us make
more than the government could, and pay for more of our own, and our childrens future. To put it another way,
keep some of your social security contributions and play the financial markets lottery.

In his challenge, Mr Kinsley correctly describes why it wont work. Let me give you two examples why its even
worse than he describes.

1. Our Pension System

In the first example, as described so well by the NY Times, when companies were given the chance to make
investments to meet their obligations to their pensioners, they were unable to do so. They had the option of taking
on more risk, or playing it safe. They took on the risk and lost. True, there was the inherent use of pension
accounting to scam wall street on earnings, but when it was all saidand done, when corporations took on the job
of investing for the financial security their retirees, they were unable to do so. They are now turningto the
government funding of The Pensions Benefit Guaranty Corp with the expectation of being bailed out.

If the experts that run our pension system had the expectation of financial protection bythe government if
they failed, do we really think that all of us wont have the same expectation ? Does anyone really believe that the
politicians later in this century wont latch on to “protect the unfortunate who fell prey to former President Bushs’
misguided Social Security bailout ?” as a means of buying votes ? And each and every one of us knows it and
will think it when we make our choice of “investments”. Why not go for the jackpotif you know thatwhen
you hit 70 you will be reimbursed?

2. The First Command Financial

What our President fails to realize is that we wont choose where we invest that money.

We will be marketed to, and sold financial products by companies who want that money. Buy media and
brokeragestocks if this change happens. We will be inundated with more dumbass commercials about how this
broker from this firm and that firm wants to help secure our future. Translated, they know we are suckers with the
money burning a hole in our pockets and they are going to make a fortune in commissions on us. There will be so many
scams there wont be enough pages in the Wall Street Journal to cover them.

In the First Command scandal, our government couldnt prevent thousands and thousands of military personnel from
being sold an investment vehicle that took HALF their first year contribution and paid it to First Financial in
commissions !. Not only is it obscene in principal, but financially, that first year money will grow
the most from compounding of whatever interest or gains that might occur. So they robbed the people who we entrust to
protect our country TWICE. Personally, I think the principals at that company deserve to be in jail for a long, long
time. Instead the were fined $12mm dollars. Whoever at the SEC or NASD settled for those fines is gutless, spineless
and hasabsolutely no conscious. Hopefully its still possible for criminal charges to be filed against those
slime and someone will step in and do so.

Those in the military who allowed them to walk in the door and ripoff our servicepeople deserve punishment
as well. No onein command should be that stupid.

IF privatization occurs, commissions, marketing fees and every other service and corporate fee tht can be invented
are going to be squeezed from us. The last time I looked, I didnt pay commission on my social security contribution.
I didnt pay asset management fees. I didnt pay for commercials of brokers and their clients staring lovingly at each
other telling me the beauty of investing in oil futures.

Here is another way to look at how bad it will be.

In absolute dollars our social security contributions are not that high. The percentageavailable back to us,
far smaller. So we wont be able to buy that much of whatever financial product we are being sold. So our
commission per transaction will be high. The highest of any customer most likely.Our commissions and fees as a percentage of our savings will be high. Ten bucks a trade. 1 or 2 percent asset management fee. Its real money.

We will pay a lot and the actual amount of money that shows up on your statement is going to be a lot less than what it would have been if you just let the government keep it ! Your money wont have to earn more than the treasuries the government buys. You are going to have to be such a wise investory, that you have to earn more than treasuries after commissions and fees eat up 2, 3, 4 or more percent. Face it, you probably are going to lose money on that account compared to what the government could have gotten !

Of course your brokerage or fund wont tell you that. But thats a minor detail.

Lets face the facts. Our military couldnt prevent its soldiers from scams. Our soldiers couldnt protect
themselves. Our pensioners couldnt trust their former employers from playing to wall street and taking more
than reasonable risk, knowing that they could be bailed out.

What makes us think its going to be any different for most of us ? Sure, some of us will use the money and get
some better returns, but we are already making better use of our savings and probably need the opportunity to invest our social security the least.

My bet is thatthe people who need the money the most, will take the greatest chances and will be sucked dry
the fastest. Why wouldnt they take more chances? Its found money. They have every reasonable expectation that the government will bail them out if they dont strike it rich.

Here is Michael Kinsleys challenge. Read it. Email it and fax it to your senator and congressman. Forward copies
to friends. Its your family’s future at stake

A BLEG FROM KINSLEY: My old boss and friend, Mike Kinsley, now running the
editorial pages at the Los Angeles Times, poses the following conundrum, which he invites any of you to refute. Yep,
he’s a big media guy turning to blogs for an answer. Write responses to him at Here’s
his argument:

My contention: Social Security privatization is not just unlikely to succeed, for various reasons that are
subject to discussion. It is mathematically certain to fail. Discussion is pointless.

The usual case against privatization is that (1) millions of inexperienced investors may end up worse off, and (2)
stocks don’t necessarily do better than bonds over the long-run, as proponents assume.But privatization won’t work
for a better reason: it can’t possibly work, even in theory. The logic is not very complicated.

1. To “work,” privatization must generate more money for retirees than current arrangements. This bonus is supposed
to be extra money in retirees’ pockets and/or it is supposed to make up for a reduction in promised benefits, thus
helping to close the looming revenue gap.

2. Where does this bonus come from? There are only two possibilities: from greater economic growth, or from other

3. Greater economic growth requires either more capital to invest, or smarter investment of the same amount of
capital. Privatization will not lead to either of these.

a) If nothing else in the federal budget changes, every dollar deflected from the federal treasury into private
social security accounts must be replaced by a dollar that the government raises in private markets. So the total
pool of capital available for private investment remains the same.

b) The only change in decision-making about capital investment is that the decisions about some fraction of the
capital stock will be made by people with little or no financial experience. Maybe this will not be the disaster
that some critics predict. But there is no reason to think that it will actually increase the overall return on

4. If the economy doesn’t produce more than it otherwise would, the Social Security privatization bonus must come
from other investors, in the form of a lower return.

a) This is in fact the implicit assumption behind the notion of putting Social Security money into stocks, instead
of government bonds, because stocks have a better long-term return. The bonus will come from those saps who sell
the stocks and buy the bonds.

b) In other words, privatization means betting the nation’s most important social program on a theory that cannot
be true unless many people are convinced that it’s false.

c) Even if the theory is true, initially, privatization will make it false. The money newly available for private
investment will bid up the price of (and thus lower the return on) stocks, while the government will need to raise
the interest on bonds in order to attract replacement money.

d) In short, there is no way other investors can be tricked or induced into financing a higher return on Social

5. If the privatization bonus cannot come from the existing economy, and cannot come from growth, it cannot exist.
And therefore, privatization cannot work.


So Whats the solution ? First, we cant just try to fixSocial Security as an isolated program. We need to
somehow change the culture of DC to one that respects fiscal sanity. We give our politicians license to “go out and
get money” for projects that selfishly benefit us. We want that money for the insect museum down the street, or the
new highway to the undeveloped part of town, or for whatever pet project buys jobs and votes. We have to change the
culture of allowing our votes to be purchased with gifts. Until then, the only way to pay for our future is by
increasing the risk we are forced to accept hoping it “all works itself out in the end”. At some point we will
realize the hard way , that it doesnt.

68 thoughts on “Required reading regarding your financial future

  1. plz tell me abou8t the control of finance is the benefit of the every body or not
    what is the global impact of the financial control on the business

    Comment by irfannajar -

  2. Sign the petition to stop social security privatization, increase the minimum wage,and repeal the faulty Republican prescription drug benefit and replace it with a simple 80 percent coverage of medication under Medicare Part B.

    Sign the petition to demand a revote in Ohio and Florida

    Comment by maximus -

  3. I’m glad a bunch of fiscally sane libertarians showed up in the comments. Even if you think privatization is a bad idea, all those poor uninformed masses will REALLY be screwed when the present system goes completely bankrupt in 30 years after the boomers. The current system (aside from the basic immorality of stealing my money away from me and giving it to other people without my consent) is inherently hostage to demographic trends; these trends right now spell complete fucking disaster in the fairly near future when those boomers retire and there are simply not enough workers to foot the bill. As Michael Ray Richardson said, the ship be sinking, and doing nothing to the current system ensures disaster. And incidentally, Mr. Kinsey’s suggestion that we just need to “change the culture of allowing our votes to be purchased with gifts” is staggeringly, embarrasingly naive. He ain’t changin’ any of that.


    Scott Wickett
    Fort Myers, FL

    Comment by Scott Wickett -

  4. Sadly with First Command (formerly USPA/IRA) many of the locations sit right outside the front gate of post and are staffed and run by retired military officers or current military spouses. That is their foot in the door and they exploit that position. Exploiting the weakness is a key military maneuver taught to even the lowest ranks. First Command is all about trying that one…

    They stay off post in most cases and instead get the word out by having a booth at the newcomers welcomes, sending mail to RESIDENT at every address on post because after all they turn over occupants every few years and they also do it by aligning themselves with local real estate agents (usually retired military) who pass along the literature in the new “thanks for buying a home” brochures.

    My former position was one that had me on post every 9 weeks welcoming the newest post arrivals. This was co-hosted by us and of all people First Command. They would not sell a single thing but all the men and women present were retired military, so they could relate to the soldiers. They would draw them in with the Been There Done That stories and then spring the trap. They would then invite them to an off-post seminar that had several sessions so you could make at least one of them, they would provide food and beverage and sell you their product.

    Being former military they tried to get me, but I had seen them at work one to many times. When I refused their advance they move in to the “strong arm tactics” and become annoying to the point where you have to lose a friend over this, sucks but it happened.

    Even worse, when the soldier leaves one post for another one he is fresh meat all over again. Someone else is going to set up the same thing and try it all over again. Stay in the military for a career and you might here their garbage 12 times in 20 years.

    Sorry, I have rambled on but as someone who has seen first hand the tactics they use I felt I needed to reply to this post.

    The military is a great big family and just like any dysfunctional family you always have that one relative who will do their best to screw you over.

    Comment by EB -

  5. Mr. Cuban,

    I wrote you a letter about month ago regarding this very subject. I am sure it never got into your hands. I have a brilliant idea (I think), that I am dying to share with somebody with your business savvy and scruples. It would create private accounts for all americans OUTSIDE of social security. It would not take any money out of the current system. Please let me know how I can share it with you. I tried emailing it to you, but it kept getting bounced back to me.

    Comment by josh -

  6. so basically it would be more financially sound to go out and buy an extra mattress to put my social security ‘investment’ in huh??

    Comment by Diane -

  7. Part of the problem is the way Social Security has been framed. It is considered to be an investment program to provide a pension. More accurately, it is an insurance system that provides, in addition to retirement benefits, disability benefits and widow benefits. And, since it’s inception, it has more or less eliminated poverty among the elderly.

    No one likes to talk about transfer programs because redistribution of wealth is considered taboo in this day and age. But this country, and just about every other country, taxes people to pay for public goods, or in some cases private goods for others. I personally am a lot more outraged over billions of dollars going to Haliburton than I am about social security, but that’s just me.

    We should acknowledge SS for what it is, a program which allows our nation’s elderly who have worked all their lives to have a basic safety net in their retirement age or earlier if they become disabled. There is plenty of wasteful government spending in Washington that can and should be eliminated. SS is not among that.

    Comment by Joshua -

  8. way to go Mark,

    you perfectly articulated the fears I have about our president privitizing social security, specifically concerning the marketing/fraud aspect of it.

    you seem like a guy who knows a thing or two about money, so its nice to hear your views on this subject.

    -pat from VT

    PS: if you haven’t heard about the Vermont college basketball star Taylor Coppenrath, check him out! you should totally draft him, the whole state would instantly be converted to Mavs fans!!

    Comment by padraig26 -

  9. The rhetoric of the SocSec proponents reminds me selling points for deregulating the Savings and Loans. ‘Taking the handcuffs off loan officers to allow higher return investments’ was the buzz.
    The reality was that the S&Ls were then looted by Republican fat cats (even Dubyas brother Neil Bush – Silverado S&L) cashing in on the deregulation. Google ‘neil bush silverado’ and pick out a link to a source that you trust.
    Taxpayers paid back the money that was looted thru the Resolution Trust. Money stolen from individuals will not be replaced after they step up to the two dollar window. And the fat cats win again.

    Comment by john gregg -

  10. “American’s workers deserve the right to control their own financial future.” “I want ownership of my savings.”

    LISTEN UP folks: You have those rights RIGHT NOW. No one has to give you the right to control your own financial future. Save some of your current on the side. Give up that extra large SUV and buy a smaller car or a one year old used car (oh, the horror!). Put the purchase savings and the gas savings into an index fund. Give up having a second or third VCR/Tivio/$5000 big screen. Put that money in savings.

    Here’s a thought: Pay off that credit card with !5-18% interest rate. It’s the best “savings” you will ever get.

    “Liberals” are not keeping you from saving your own money – YOU are spending it too fast! Ownership of your future benefits? Create some by saving a portion of the other 94% of your income that SS does not take, for crying out loud!

    The simple fact is this: SS is a pooled benefit fund. The same principal works for house insurance: everyone pays a little so they won’t be out in the cold when the need comes. Private, individual accounts require between 23 to 27% MORE money (depending on the actuarial variables) to provide the same benefits as a pooled benefit fund. Why? Because not everyone lives a long life, so a pooled fund can use some peoples’ contributions to help others.

    Private, individual accounts must have enough money for every single individual to live a long time, even though each person will not. You don’t know if you will outlive your money, so you need to save even more.

    Does anyone here truly believe stocks will always outperform bonds by over 23%? If so, why would any one ever buy bonds at all?

    Finally, every “privatization” plan out there requires that the private money go into some type of Annuity Account at retirement. Think about this, “Own & Control My Money” folks. In these “private” plans, you will be required to “invest” your money in an Annuity – the biggest scams (read Scott Burns’ columns) going. The rates are poor and the fees are high. Annuities do two things for certain: They guarantee a nice profit to the brokerage/insurance company. And they keep any overage of your money after you die.

    And thus dies the final claim that your remaining money will go on to be inherited by your children. No such chance. It will be in the pockets of Wall Street brokers and insurance companies.

    Read up on these “privatization plans.” Wake up and smell the coffee you’re being sold! Ownership, my foot.

    Comment by Chris -

  11. Here’s Kevin Drum ( on just how badly the privatization scam has hurt the pension plans of other nations:

    fairy theorizing is one thing, but how about some concrete data in the
    great Social Security privatization debate. In particular, how has
    Social Security privatization fared in other countries that have tried
    it? After all, the United States isn’t the first country to think about
    doing this. Let’s take a peek.

    First there’s Chile. They implemented privatization a couple of
    decades ago, and originally the World Bank was enthusiastic. Today,
    though…not so much. Greg Anrig of the Century Foundation summarizes:

    Investment accounts of retirees are much smaller than
    originally predicted — so low that 41 percent of those eligible to
    collect pensions continue to work.

    The World Bank found that half of the pension
    contributions of the average Chilean worker who retired in 2000 went to
    management fees. The brokerage firm CB Capitales…found that the
    average worker would have done better simply by placing their pension
    fund contributions in a passbook savings account.

    The transition costs of shifting to a privatized
    system in Chile averaged 6.1 percent of GDP in the 1980s, 4.8 percent
    in the 1990s, and are expected to average 4.3 percent from 1999 to 2037.

    Bummer! Still, maybe that’s just Chile. How about
    results from some nice, progressive, wealthy country instead? How about

    Sweden implemented a partial privatization back in 2001. Here’s what the president of the Swedish Society of Actuaries reports:

    benefit levels have been significantly lowered, future benefits are
    impossible to forecast, and administrative costs have quadrupled
    — mostly because of the mutual fund part — to 2.0% of total benefits.
    (If real investment return is 3% per annum, the amount accumulated
    after 30 years of regular annual savings will be 22% lower if the cost factor is 2.0% instead of 0.5%.)

    ….Everyone in the new system is forced to speculate in mutual
    funds and results in the first years have been disastrous. From March
    2000 until March 2003, the Swedish stock market declined by 68%. As of
    31st January 2004, 84% of all accounts had lost money, despite the
    upturn in the market since March 2003.

    Aren’t you glad that President Bush wants to follow in the footsteps of glorious successes like these?

    —Kevin Drum 1:49 PM


    Comment by Phoenix Woman -

  12. Some basic facts:

    1) Social Security is what ended the chronic problem of poverty among America’s elderly.

    2) Republicans have always wanted to kill Social Security. Always. Why? Because it shows that Big Government Programs Work. In 1964, killing it was actually part of the Republican presidential campaign platform.

    But the program was far too successful and popular to be killed outright, so the Republicans had to spend the past few decades, and a few hundreds of millions of dollars, spreading sky-is-falling propanganda. That’s been the job of the Cato Institute, which is responsible for most of the regurgitated Republican talking points that have been spewed on this thread.

    Social Security’s overhead costs are less than 1% right now. Privatizing it would multiply these costs by at least TEN, and more likely FIFTEEN, times.

    By the way:

    In 1994, when the Cato folks first touted privatization as a destroy-the-village-in-order-to-save-it way of killing Social Security, they claimed loudly and often that the doomsday date — the date when Social Security would no longer be able to pay 100% of its commitments — was 2029, or 35 years away.

    Ten years later, using the most pessimistic economic predictions imaginable (essentially assuming that the US goes deep into a 1930s-style depression and stays there for decades — which, with Republicans in charge, actually does seem rather likely), the doomsday date is 2042 — or 38 years away.

    In other words, “doomsday” is farther away now than it was when the Cato bozos first started up their spiel.

    What does that tell you?

    Comment by Phoenix Woman -

  13. A few points:

    – Do you have *any* confidence whatsoever in this administration’s ability to solve *any* type of problem?

    – The Social Security “crisis” is manufactured; there is no crisis. A “crisis” would be if SS funds were about to run out next year, not 50 years from now.

    – The immediate problem we face isn’t over Social Security, which continues to run up huge surpluses (just as it was intended to under the early-80s reform), but that our non-Social Security budget continues to run massive structural deficits.

    – WRT the arguments that “it’s my money, I should be able to do what I want with it,” there’s nothing wrong with investing your money wisely. That really is the path to wealth. But Social Security is different. It’s a baseline of *guaranteed* retirement security and income for *everyone*. You get it whether you retire in boom or bust times, whether your life turned out good or bad. The two things are simply different.

    God, I wish Kerry had been elected last month.

    Comment by Sam -

    Paul Krugman’s analysis of “privatizing” Social Security, which is a euphemism for taking care of wall street, now that the defense contractors and energy companies are taken care of…

    Expect the first 5-8 years of your $1000 to disappear in fees. Add to that Social Security’s 1% annual cost to manage, and it actually looks like a government program that works!

    Comment by MissM -

  15. Whatever, Cuban.

    Workers deserve the right to control their financial future.

    Every working American should support President Bush’s proposal to allow employee choice.

    Remember folks – Mark Cuban’s the genius who let Steve Nash bolt to Phoenix.

    Why listen to him about your economic future?

    Comment by SacKingsFan -

  16. Vietnam: When Nixon lost Cronkite he knew he lost America.

    Privatizing Social Security: When Bush lost Mark Cuban…

    Comment by AF -

  17. Only the last few posts have partly restored my faith in the American educational system.

    Social Security is America’s most popular and most successful government program. Its insurance safety net has ended senior poverty and provided a cushion of sustenance for widows and the disabled. Its administrative costs are staggeringly low, and it is in excellent financial health. In *all* projections, benefit payments will be higher (even in inflation-adjusted dollars) in 50, 60 or 100 years than they are today.

    Republicans hate Social Security precisely because it is a successful government program. They voted against it in 1935 and have opposed it ever since. Now they see a chance to loot the money lower- and middle-class Americans have paid into the program for decades and donate it to their Wall Street backers.

    Comment by Smallbottle -

  18. This is just rough figures, mind you.

    So let’s look at 2 trillion dollars over 75 years….and the miracle of regular investment and compound interest.

    Let’s assume a 4% annual rate of return, and an annual investment of 9 billion dollars. Not a terribly large amount, when the war in Iraq is running about 10 times that. Or think of it as 3% of the current annual deficit. Put it in a lockbox, and deposit every year.

    Not surprisingly, after 50 years you’ve got 1.4 trillion stashed away. Poof – there is no crisis.

    Comment by Greg -

  19. Its called the Enronization of Social Security.

    The GOP sold deregulation of the energy market to California in similar terms, look what happened.

    I would be much more willing to accept the claim that Social Security is in crisis if the administration showed the slightest interest in cutting back on any of their pet projects to help cut the deficit. Things like delaying the abolition of inheritance tax. Come to that why can’t they axe their star wars boondoggle that is clearly junk and use some of the $30 billion saved to buy armored Humvees for our troops in Iraq?

    The amounds being discussed are insignificant over the timelines. The $11 trillion shortfall Bush mentions is over the ‘infinite horizon’ whatever that means. The real 75 year shortfall is only $2 trillion of so which is equivalent to five years of Bush administration deficits.

    The Clinton administration raised taxes to save social security. The only thing that went wrong with that plan is that Bush then used the money to fund massive tax cuts for the most well off.

    If social security is in crisis as the administration claims then why isn’t the even larger current account deficit an even greater danger?

    Comment by Phill Hallam-Baker -

  20. Social Security is not a Ponzi scheme. A Ponzi scheme keeps multiplying alleged “beneficiaries” so that you quite literally run out of people to pay for it. Social Security is, give or take a few, a constant transfer from current workers to current retirees, on the basis those current workers will get the same when they become retirees — unlike a Ponzi scheme it is specifically designed to avoid running out of people to pay for it. And, with its administrative overhead of less than one percent, it beats stone dead all the part-privatized schemes in Britain, Chile, Argentina etc. that have caused their countries massive problems with the huge debts and exorbitant commissions that more than eat up any advantage in investment returns. Furthermore, even if we do nothing with Social Security, the drop in benefits (according to the Congressional Budget Office) will be much less when it “goes bust” (i.e. has to modestly lower benefits in order to stay solvent) than the cuts the president’s own advisers say we will have to make to benefits with a part-private system.

    Also, much of the current debate on Social Security is based, not on the Congressional Budget Office figures, but on the Social Security trustees’ figures — which assume a lower rate of economic growth than at any time in this country’s history, even the period that included the Great Depression. Basically, you only have a genuine crisis in Social Security if you have something worse than the Depression coming up (in which case we’d not only be losing Social Security, we’d be holding bake sales for the Air Force).

    The real issue isn’t Social Security. The real issue is runaway spending on other programs combined with runaway tax cuts. If the politicians really think they can fix government by trashing Social Security — the one program that actually works as it is supposed to, then they have one more screw loose than I thought. Not to mention absolutely no ethical standards at all.

    Our ability to properly fund national defense is undermined in a time of war by massive tax cuts for the rich. Our health care programs like Medicare are terminally screwed up because we refuse to deal with administrative overhead and cost control in health care. Our government has run amok trying to nationalize education policy and spending. These are the real problems. Trying to blame Social Security is a pathetic, outrageous excuse by politicians who do not belong in public office.

    Comment by Daniel -

  21. Sure, the President’s plan is guanranteed to work. But I do know the biggest ponzi scheme ever created is guaranteed to fail if we go with the status quo.

    So SOMETHING has to be done about it.

    Comment by Brandon -

  22. Isn’t this from the same guy that equated social security to a ponzi scheme..? Or am I getting my blogs mixed up.

    One thing that wasn’t mentioned, and leads me to believe the entry is biased (as it is Mr. Cuban’s right) is that he never once pointed out the potential in privatization, and obviously there must be potential, or it would not be considered.. And also, he never mentioned that it was merely an OPTION.

    Sure the average Joe Schmo might roll the dice and lose, but that’s Joe’s decision. I don’t want to live in a country that tells me I don’t have the right to control my own money. Privatization is just a choice. Isn’t that a big buzz word for most liberals? Choice.

    Say it with me, left-wing.. CHOICE..

    Comment by Matt -

  23. Agree with Mr. Cuban’s comments on what should be done with First Command’s execs (sent to the brig or stockade). The NASD and SEC, however, do not have the authority to do this. They did what they could and waged war honorably against FC’s $750.00 plus per billable hour attorneys, Ira Sorkin and Lanny Davis.

    The $12M in fines the NASD got from FC will be used as a restitution (refund) pool and for investor education. I urge any and all of you who have a problem with what FC did to contact your US Senators and tell them you want an official probe into high ranking Air Force officials who may have “aided and abetted” this organization.

    Please visit the NASD and SEC websites for more details on exactly what was done and why: (see litigation section)

    To the gutsy Air Force captain who advised his airmen not to take FC’s calls, I salute you, sir. If the JAG officers give you any guff, tell them you’re protecting your troops and it’s too bad they aren’t.

    Comment by yolanda m. holtzee -

  24. I am 33 years old. When I plan for retirement, I count zero dollars from social security. For me social security as it is today is a simply a tax. I expect nothing in return. I will get nothing from the current system.

    If I had control over the money I am putting into social security the worst I could do would be to loose it all. My worst is the same as the government’s best. Why wouldn’t I be in favor of privitization?

    Comment by DoesntCompute -

  25. First, let’s face the facts that social security is a lie and another tax, and was sold as a social program. I don’t see how the free market selling financial products to consumers is worse than that. The problemis not the free market but the government being more than a government.

    Secondly, Bush is trying to restore the “social program” and make it work, even though it was deisgned not to work by setting the age requirements at the time so little of that money would be returned. I disagree with Bush, he should just get rid of the entire social program and all others. If we didn’t have to pay so much money into the govt. we would have money left over for retirement.

    Comment by Justin -

  26. It’s nice to know a billionaire cares about Social Security. If you cross posted this at the highly popular polital blog, I guarantee it would make the recommended diaries list.

    Comment by lindsay -

  27. I don’t want to get into the argument of if privatization of Social Security will work or not, but I would like to, once again, thank Mark for an honest, open, and surprising opinion. That’s one of the reasons I’ve been lurking in this blog for a while now, and I’m now compelled to speak out.

    It’s refreshing to see someone who has “enough” money to not worry about Social Security going bankrupt or not put forth an opinion that might not quite match what would be expected from someone in his social strata. Mark’s analysis is clear and complete, unbound by conventional wisdom of “minding your own buisness” or “it’s not your problem.”

    Thank you.

    Comment by Senor pez -

  28. Social Security is not a retirement plan. It’s insurance against homeless seniors. If Bush & Co. want to privatize it, great. But if and when a lot of more seniors start showing up on the street, there will be tremendous pressure to do something about it. Again. You know, like there was in the 1920s & 30s. What then?

    Comment by Derek Scruggs -

  29. Privitization can work if we invest where Congress invests. Apparently they’ve been beating the average for years.

    Comment by John Compton -

  30. Lots of interesting comments above, but I’d like to expound on one point that has remained (almost) untouched–the First Command debacle. I’m a captain in the Air Force and I have seen first-hand how FC fleeces troops. In fact, I’ve done something illegal regarding FC–I’ve given a direct order to my subordinates to not contact First Command or to return any contact attempts by FC (technically, that’s not a lawful order; it’s in the same ballpark as making one of my airmen wash my motorcycle).

    I’ve called the local FC rep and told him that he is not to contact anyone in my unit and been laughed at. Because here’s what makes First Command so insidious: They use recently retired, high-ranking officers to push their crap on troops. When a guy who yesterday was your boss’s boss’s boss calls you on the phone and invites you to a nice dinner to talk about “investment opportunities” and “taking care of your family” you feel pretty damned compelled to at least hear him out–if for no other reason than because he is good pals with your new boss’s boss’s boss. It’s a system that abuses the loyalty of military men and women and is truly a swindle of epic proportions.

    Sorry for the rant but First Command is one of my pet peeves and this seemed like a good place to vent.

    So Mark, even though I’m on the fence with regards to your entry overall, you’ve certainly made some salient points throughout the post.

    Comment by Derek Schin -

  31. Just a continuation on my previous post, I started to write something long on the first post but decided I just wanted to get to the point (automatically adjusting retirement ages) instead of giving all the background information that led me to that system a few years ago.

    I think most people totally misunderstand what money is. Money itself doesn’t do a damn thing for anyone. If the US government were to give every american a billion dollars we would not all be rich, instead we would all have huge piles of paper that were basically worthless.

    This is why all of these investment schemes that people keep talking about don’t really work the way everyone who pushes them says they will. In the end it all comes down to what money is, which is a system of exchange for labor. Unless someone is willing to do work in exchange for the money it doesn’t matter how much money you have, it is still just little pieces of paper.

    If the USA were to go to an investment/savings system instead of social security, inflation will eat away at investments in such a way to force retirees to only be a small percentage of the total population. If 80 percent of the population is over 65, they cannot all retire because the other 20% of the population cannot provide services to those in retirement, thus the cost of services these retirees wanted, whether it be an automobile or medical care, would rise to force them out of retirement since their savings would no longer be able to provide them with the lifestyle they wanted.

    So in reality we have a choice of two systems. Either a private investment scheme where retirement ages automatically adjust through inflation/destruction of investments or a government retirement program where retirement ages are set by the government so that everyone knows well ahead of time when they will be able to retire.

    Those really are the choices for the vast majority of the population. Certain people will always be able to acquire much larger assets than others through higher value work, luck, inheritance, or whatever. In the end someone has to provide goods and services to those who are retired.

    The percentage of people who can be retired at any point in time depends on the lifestyle the retirees are willing to accept and the taxation the workers are willing to accept. This balance will either be accomplished through a government controlled predictable system or a chaotic free market system, but one way or another the system will find that point of balance.

    Comment by Shawn Fox -

  32. The problem with the social security system today is that it is not set up to automatically adjust the retirement age according to how long people live and how many people are contributing to the system. The retirement age should automatically adjust according to the number of workers. If the age adjustment is not completely automatic it becomes a political issue. This would completely solve all of the problems with social security (not just in the USA but in every country that has a simliar system). Just set the age automatically so that only 20% of the population can be supported by social security at any point in time and allow people to retire only as more are born or as those who are currently in retirement pass away. The percentage can be adjusted according to productivity etc, but the basic point is to limit the burden of the retirees on the current working generation.

    In the end that is what happens anyway but the mechanism is much more messy and much less predictable. Someone needs to step up to the plate and change the system to be fair and balanced for everyone and my system is the only one I have ever seen that would really work.

    Private investment schemes etc do not work because a large percentage of people are not educated enough to make the correct decision. Even if they do always make the “correct” decision, just given the huge number of people sometimes things go bad and some people would not have enough to support themselves in retirement through this type of system.

    Comment by Shawn Fox -

  33. This is about political philosophy, not saving social security. Social security was sold by promising more than a “market return”. That’s why early participants loved it. Socialist dreams. Now that it’s underlying unsound structure has been exposed, who’s ox gets gored? Private accounts are a carrot, the stick will come later. Lower benefits for higher income earners. But maybe that’s fair, they benefit most from tax deferred plans like IRA’s, 401K’s, ect. But lets have an honest discourse about about the subject. Don’t get me wrong, I’m all for private accounts. But I’m a Libertarian, I don’t believe in public schools, or any of these state run programs.

    Comment by Doug B -

  34. Look, you will never get the pro-privatization people to agree with you, because all of these stats and arguments are meaningless. It all comes down to one belief:

    I know better.

    It is the same reason people with no experience in a particular arena (sports, politics, economy, psychology, etc) confidently express opinions on them and truly believe they are right and the “experts” are wrong. It is how places like Vegas continue to succeed. Perfect example:

    “Don’t underestimate the average joe… we’re alot smarter than you may think.”

    Umm, no. You are average. That is exactly how smart you are. Average. That is the definition of average. Do you realize, to profit in the stock market, someone has to lose? You specifically have to be better than average. What’s more, it is not evenly distributed even among the better than average investors. The real experts, who have studied everything, have access to insider info, or years and years of experience are the big winners. It is not one person winning and one person losing. It is a thousand people losing and one person winning big. Only that one person isnt some random average joe, it is some millionaire market expert, investment banker, or trading house.

    Our President is about to send millions of average joes to go play poker against an array of the world champs. Of course, we all think we can still win. The optimism that I so love about America is going to prove very costly, soon.

    Comment by John P -

  35. So here’s this guy who’s made more money than most of you can dream of; and you don’t listen to what he’s saying!

    Social Security is an insurance policy for our society run by the government.

    What happens when you have an automobile accident at age 30 and can no longer work for the rest of your life?

    Investments are a zero sum game. Listen to Mark. Bush’s plan is pay back to the bankers and insurance companies and brokers who’ve put him in office. Remember, too, that an excess was filtered off of social security by Bush during the last four years.

    Also understand that the government has recalculated the Cost of Living so that it doesn’t have to increase payments by the actual increase in cost of living.

    Who is going to take care of your parents? Your grandparents? Your children who have an illness and will never work?

    Comment by Harry Roedersheimer -

  36. Many conservatives I know are big on ‘personal responsibility’ and for good reason. It is utterly ludicrous for anyone to expect other individuals or society as a whole to bail them out of trouble of their own making again and again.

    That said it is my belief that we also have a ‘societal responsibility’ as well. “Am I my brother’s keeper?” Yep. Just as we bear a responsibility for our own actions we bear responsibility for our society as a whole.

    In theory government is one of our best tools for exercising our responsibility to society. It exists to create laws that benefit society as a whole even if some of them are detrimental to specific individuals or groups. Like any tool it’s not right for every job but used correctly it can be very effective in certain situations.

    Unfortunately too many conservatives seem to have lost this perspective. Government is nearly always assumed to be ‘bad’ or ‘inefficient’ even when that isn’t necessarily the case.

    Social Security is a great example of this. As constructed the program is geared entirely toward societal responsibility. Our government is ensuring that, in theory, all elderly citizens will have some money to live on when they are no longer capable of working. It doesn’t discriminate well between those who have invested wisely over the course of the years and those who have lived wastefully.

    Of course that’s all the ivory tower view. The reality is that our politicians often serve themselves more than they serve us. Corruption seems to be endemic to both parties. The individuals and corporations who have the most money seem to control what really happens while most Americans hide their heads in the sand becoming fatter, dumber, and happier.

    For social security the result has been that money has been taken out of the system each and every year to fund other things that our pols & the voiced they listened to wanted but didn’t really need. The result is that the current system doesn’t really work. It will run out of money if nothing changes. As others have posted the returns are poor and the aging population is about to put a never before seen stress on the system.

    Into the breach steps our president. He promotes fixing things by giving ordinary folks the ability to control their own money. How can anyone not want control of their own money … especially given the reality of our current system?

    I can see why many people instinctively like the idea.

    Unfortunately I agree with the analysis Mark posted. It sounds good but it is unlikely to actually work. This is actually one area where the government can do a good job, in theory anyway.

    To me the ‘solution’ seems simple. We as a society need to decide if Social Security is something that we really want. Is it good for our society to have a ‘retirement plan’ for our citizens? If so then we just need kill the corruption that hurting the system. We need to make social security a real trust fund that our greedy pols cannot dig into to bail themselves out of other financial mismanagement. We need to spend the money to make the program solvent enough to work … and we may need to sacrifice other programs to do this and possibly reduce benefits as well.

    What is really broken is not social security, it’s us. We’ve let our politicians, both Democrat and Republican, lead it to near ruin.

    It’s time to take responsibility.

    Comment by Todd S -

  37. It is not the gov’t job to make me save my money. Nor is it society’s burden to bare when I am old and broke. I can save my own money perfectly well, thank you very much.

    Comment by Scott Griffith -

  38. To start with, a disclaimer: I work for a mutual fund company:

    I think you’re way off base here.

    First off, the Social Security program may have started as a way to protect us from ourselves in 1939, but at this point, its a hidden payroll tax of an extra 15%.

    If you were going to design a really conservative retirement plan, you can do much, much better then Social Security without even trying, and for a lot less money. As other commenters have pointed out, the T-Bills that Social Security is _forced_ to buy pay the least. There are lots of very conservative investments that would pay better then that, such as municipal bonds without resorting to the ups/downs of the stock market.

    SS is terrible as a retirement plan precisely because its not a retirement plan.

    Now I grant you that some people will not do well with their 1% or whatever.

    But many people will. Millions of Americans have 401K plans, and they seem to be doing ok managing them. The stock market isn’t for everyone, but I spent an hour talking with my dad yesterday, and because he’s older, he has all of his 401K money in a bond fund, paying him 6% a year. I didn’t have to tell him that, he knew that on their own.

    So I have to say, your opinions are beyond elitist they’re snobby. You’re right that everyone will get marketed to, but that’s been going on for awhile now, the newstands are full of magazines giving advice. Whether people take that advice or not is up to them, but its there.

    As for the First Command thing: I don’t know anything about FC, but its typical in the life insurance industry that your first year of payments is commissions, that the benifits don’t really start accruing until year 2. You have to pay the salesmans salary somehow, and that’s where it comes from.

    Now as far as Mike Kinsley goes, he’s fundamentally wrong.

    The US economy is not a zero-sum game. Greater economic growth does not require more capital investment or smarter investment of the same amount of capital. It can come from more productive use of capital.

    To Kinsley, $100 spent for someone on welfare is the same thing as $100 spent on wages.

    That’s just not true because the $100 spent on the welfare recipient doesn’t produce anything of economic value. (Whether the welfare recipient is a person on AFDC, a bureaucrat shuffling paper for no reason, or a corporation receiving government subsidies.)

    The $100 in wages produces $110 in good or services though. Those goods or services can be resold, producing $10.

    That’s economic growth in a nutshell. So its not true that if money comes out of the SS system (which Kinsley seems to agree is really a tax) that the government may have to raise it somewhere else. Its quite possible that by moving that money from the unproductive government to productive private industry, that any shortfall may be made up from growth.

    Kinsleys argument about newly available money bidding up the price of land and stocks might be partially true, but it ignores the ability of the economy to form NEW businesses (most NEW jobs come from NEW businesses), and it also ignores that some of the money may be invested in bonds, thereby pushing DOWN interest rates.

    So Kinsley’s understanding of economics seems somewhat dismal to me.

    If companies prices go higher, that can be reflected in more hiring, which causes job growth, which raises salaries, which increases the government’s take…

    What were you guy’s doing in the 1990’s that you missed that Strong Stock Market == Strong Economy == Higher Tax Revenues?

    Comment by Pierce Wetter -

  39. It’s really quite funny (but sad at the same time) to witness the depths of absurdity that is the american social system. I am a dual US-Canadian citizen, that resides in Toronto. 2 things I still havn’t figured out about the united states of america (my country of birth). 1. How the interests of the rich continually take precidence over that of the poor…nobody seems to recognize it (with a few exceptions of course, Mark). 2. How those on the bottem end of the socio-economic stratum, not only keep getting kicked in the nuts, but oldly seem to enjoy it (the biggest fans of american indoctrination seems to be the poor). 3. Nobody outside of the United States of America can understand how a guy as dumb as bush could get elected to the presidency…i guess he’s not so dumb afterall.

    Comment by Onirik Sarma -

  40. Hi all,

    Perhaps a good example of what could be done is to look at Switzerland. We have 3 levels of possibilities to save for retirement.

    First level is social security. We have to pay.
    2nd level is pension fund plan provided by every companies.
    3rd level (and that’s what I want to pinpoint) is the free possibility to put up to a certain amount of money on an account which will pays you a greater interest rate as those funds will stay for a long time on the account and/or the possibility to invest in mutual funds. Also, this is a deductible for tax purpose.

    The idea in itself is not without merit (Bush’s proposal) as it wants to start fixing a problem which is going to grow every year we wait. I also believe that we should never expect and count on the government to bail us out. The government should be here to provide us with incentives to save for retirement so we don’t become dependent.

    As for the style of investment, I disagree with the saying that stocks don’t outperform bonds, especially after inflation! I also disagree to those saying that stocks are too risky or that we can’t foresee the future of interest and more…. This is what the stock market is. It is a representation of the expectations for an Economy and at the same time it is the reflect of the current state of the information available to the public. Saying that the Social Security has a lower risk is not difficult, but with lower risks, comes lower return and ‘if’ we were to see interest rate increasing promptly, inflation out of reach, bonds will underperform for some time and your social security fund will not be able to outpace the inflation, therefore losing your initial investment. So, there is no ‘safe’ investment for the next 40 years, what we know is that a well balanced portfolio and a good follow-up will help you 1. saving your money 2. have a decent return 3. be available at retirement.

    Too many people are spending immediately their wealth, while if you were to invest in a blocked account, you would at least have some assets for the future and this will also be distributed to your heirs!

    I believe President Bush’s proposal is not perfect but is better than having a status quo. The risk is real that in the future, the social security won’t be able to pay what it should without being bailed out by the government, which eventually, you will pay for via your taxes. We cannot let this go without reacting strongly and certainly one of the best way is to get the attention of the directly interested people, those who benefits or will benefit from their social security payments and alternative investments. We must be more responsible for ourself if we want to be able to survive the SS crisis.

    As for the cost of investing in mutual funds and investing in the market as well as the risk.

    This is where the government should act by providing an incentive to asset management companies and individuals to mutually work together toward lower costs for individuals and a better visibility and guarantee from the government.

    To those who talk about the cost of investing, do you really believe that you don’t already pay charges for the social security fund administrator to manage your retirement? I believe we can pay lower charges via a scrutinized mutual fund industry than via the SS.

    Thank you for reading.

    For those interested, please visit

    Comment by Richard -

  41. Mark,

    You say that you don’t pay ‘commission’ on your social security contribution. First of all, that’s certainly up for dispute – just because it’s not called ‘commission’ doesn’t mean that there isn’t a huge loss incurred by the way the funds are handled. Social Security returns 2% per year. If a private investment minus commission returns more than 2% annually, it is superior to SS no matter how much commission was taken out. What matters is the end return.

    More broadly, Social Security is fundamentally a pyramid scheme. It’s not about us not being able to ‘save’ enough, it’s about a falling birthrate and not enough immigration. This means that the ratio of workers to retirees is falling too low for SS to continue working.

    I used to be in favor of privatization…I now think we shouldn’t bother, but we should start setting expectations that the benefits will be lower. Right now there is an unfunded liability of trillions of dollars, we should recognize it on the books and lower it to zero, without raising taxes – this can happen if we lower benefits by 25% I believe.

    Comment by Stephen Bronstein -

  42. In agreement with Kinsley’s last statements. The fiscal responsibility of the goverment is where fault lies.

    Just pay your 6.2% and be done with it. Quit worrying about managing your own Social Security dollars. Worry about who you vote into office.

    Just go buy your kid the new GI Joe with the Kung Fu grip (Made in Taiwan), Drive home from Pottery Barn in your BMW Urban Assult vehicle and call you wife on your foreign made cell phone.

    Basically I’m trying to imply that you spend more that what you contribute to SS on foreign designed, marketed, manufactured products supported by outsourced staff.

    Comment by Crofoot -

  43. Evan, Jess and John —

    We already have 401(k) plans. What the president is essentially pushing is to mandate the amount of money you put in them, and reduce your control over those funds. His mandated savings plan does nothing to reduce the risk you pay, which is what social security is for.

    Bush’s plan is to take out a two trillion dollar loan and invest it in the stock market, hoping this makes a decent return for you. If if doesn’t work, oh well, your problem.

    If this is such a foolproof plan, why doesn’t the federal government just spend two hundred billion a year on stock investments? In a hundred years, we could fund the entire government on the interest, and spare taxpayers the burden.

    Comment by David -

  44. The costs of business have risen as a result of rising prices for raw materials and specialized labor and the inefficiencies of modern corporate structures. Monopoly power enables these costs to be passed on to consumers and small business as higher prices, with only token interference from the Bush Administration. This shown in the recent falling demand joined to rising prices for oil, cars, and perishables.

    We are starting to see increased interests rates that are passed on by the global corporations. The giant MNC’s dominate the production and sales of the entire global economy, a restrictive monetary policy like the Bush Administration promotes more inflation (an increased hardships for small business) as will an easy money policy. A perverse question worth pondering is what will destroy the Western economy and give rise to global players?
    Inflation never means merely rising prices; it also means upward income redistribution, favoring the sellers of commodities. This is the linchpin that will devastate the Western economies over the next 25 years.

    One notable consequence of the current inflation is the increased demand for luxury goods combined with diminished demand and excess capacity of lower end goods. If the Bush Administration takes no action, the prolonged inflation will worsen the processes and create more stagnation. The politics of inflation are obviously institutionalized. Whether or not inflation begins is one matter, and may been seen as economic in its origins; how and whether it continues is a matter of politics. Inflation can always be curtailed and eliminated; the question is finally at whose expense. The logic tells us it must be at the expense of the low middle class wage earnings in the Western nation-states. That is so, other things being equal. But those “other things” are essentially a way of referring to the balance of privilege and gain in society. Tax policies could be designed that would curb inflation at the expense of the upper income groups (although I hated Kerry for this idea); expenditure policies could be utilized by Bush to achieve the same result, without damage to those who can bear that damage the least. Instead, we have policies being implemented that will limit most Americans and Westerners. <>

    The real problem with capitalism and globalization is that it is that both are social and not merely economic concepts. The basic changes that have made MNCs work better require a vast array of symmetrical changes in the rest of social existence: in the process we have become a more bureaucratic society of controlled consumers.

    Now we may note that the United States in seeking to forestall the evil of economic depression, has created a society whose achievements seem increasingly negative and whose problems link together in what steadily will continue to emerge as a social crisis in rural and urban areas.

    Of course, that is seldom seen as such is partly because of our altered standards: in seeking to master the art of quantitative advance we have not only engendered qualitative deterioration but we have lost the ability to tell the difference between good and bad so long as there is more. You can see it all social aspects of American society.

    One indication is the process by which, in the midst of the highest accumulation of commodities in history, the attitudes toward those who live on the bare edge of existence continues to become more increasingly hostile.

    Americans are upset that their jobs go to foreign locations, but they are not upset when they purchase the goods. People must figure out where they stand in this global economy. The other side of the nature of global capitalism, the direction, and the pace of economic growth and development is, on the one hand, by whom and for whom it is shaped, and on the other, by whom its burden are borne. And that adds up to reduced real incomes for those whose livelihood depends upon their work, not upon asset ownership.

    Is it enough that President Bush and certain Republicans, and conserative democratics have pushed higher inflation to pad their pockets?

    Why should we let him divid up trillions of dollars between himself and his cronies?

    I once remarked that John F. Kerry was the “look good Senator”. President Bush is “fast talk 101”. People hear what he says. But does anyone listen?

    Comment by Sterling -

  45. The first flaw in your thinking is just inherient to socially liberal thinkers, i.e. the government can do it better than the individual. The government will never cut its spending and save money because its not their money! Corporations failed to save money because it was not their money. Its your money! I firmly believe that if you made everyone in the country sit down and write a check to the IRS every pay check to cover your taxes (not just taking it out automatically) you’d change the tax code over night! NO ONE cares about your money more than you! How can you advocate otherwise? The position that people will be marketed to and are too stupid to decide for themselves what is best for them is the position that continues to cost Democrats elections.

    If its so bad and its going to fail why do government employees have the right to contribute their social security deductions to private accounts?

    The second flaw in your thinking is that you are trying to analyze the privatization of social security in todays environment. I agree that if its going to work we need to make some changes to the system. If there is a ned for bailout I’m sure some bill will make it through to provide some relief but I don’t believe the bailouts will be so wide spread and the the majority of people will be coverd. My 401K lost over 70% of its value in 2001/2002. But now its back to where it was. I didn’t do anything special I just let the managers do their job and paid them for it. I would perfer to have my retirment in my 401K. Its my money!

    Comment by CC -

  46. I definately like getting control of some of the money I have paid into Social Security.

    If the current trends of bigger and bigger government continue.. along with all the waste and corruption.. Social Security cannot survive another 20 or 30 years.. our great country will be sold down the river.. and I’ll have never seen a dime of that money. Maybe by holding it, we can protect the government from itself..

    We need a corporate restructure of the highest magnitude. The US government needs to take a real hard look at themselves, make some tough decisions, redefine their priorities and finally cut out the fat.

    Why Bush and company think that cutting revenues and inceasing expenses is good for the economy is beyond me. We are in serious trouble if we can’t fix these kinds of bad habits.

    Comment by Mike Carroll -

  47. As a former employee of First Command, your comments couldnt have come at a better time. I find it intersting when First Command tells their employees money is tight but to Mr. Cozby it really isn’t that much. Then why can’t the employees have raises and be closer to cost of living? Granted ALOT of people complain about not being paid well, but First Command takes the cake in regards to your post. They are salesmen. Period. Let’s show you how many perks you get with a gym, drinks, fruit, a monthly lunch at a country club, good health insurance…so what. Those benefits don’t put food on the table, they don’t pay for rent. The difference between the executives and the hourly is tremendous. Either you are on the top or on the bottom. Plus other little nice perks about First Command, how about firing a person because you wanted to keep them but they went to another company THAT THEY REALLY REALLY enjoyed and was paid better. How can you do that? You ruined someones life. How about sexual harassment by an executive that was never taken in the correct order. I’m glad she said something because hopefully that will get the others to speak up. First Command is just a mess. Someone very very close to me also endured abuse by a boss and that boss is still there today. I know that there is always going to be something bad about a job but how much do you take before you act?
    Thank you Mark for this post it says what alot of people want to say about First Command even though no one will listen. Hopefully someone will now. So that little slap on the hand wont be a bill but the cold steel of hand cuffs. Thanks so much Mark.

    Comment by DJ -

  48. Let’s assume that individuals were allowed to invest their entire portion of Social Security int a private investment returning 8% a year. I think this is a safe assumption giving the track record of the major indecies as well as a balanced fund such as Vanguard’s Wellington (VWELX) which has a 75 year track record and a lifetime average of just over 8%.

    Here is how much various wage earners would have left at the time they retired. Assuming they work from age 18 until 65 without ever recieving a raise.

    $5.15/hr – $583,963
    $10/hr – $1,130,652
    $20/hr – $2,261,305
    $40/hr – $4,522,610

    Just take a look at that for a moment and you’ll realize what the scam that is Social Security.

    This would allow ANY worker to retire at more than twice their income for well over 30 years!

    Comment by Jeffrey Price -

  49. Mark, while you raise valid issues with your social security argument, all I can say is Bush’s proposed solution is better then everyone else’s “lets not do anything and see what happens” solution. The reason social security will never work as designed is this:

    When social security was introduced in the “New Deal” period of the 1930’s, these were the stats:

    Life Expectancy: Male, 58.1; Female, 61.6 Average salary: $1,368

    And these expectancy’s were much larger then they had been in the past. So when Social Security was introduced, a retirement age of 65 (which they suggested may be bumped up to 70 in 1940) meant that most people would not be receiving social security. Also, the average birth rate for people was something in the neighborhood of 5-6 kids. Which meant a growing base of workers that would pay into a plan that most of them would not receive. Unfortunately for social security several things happened that kept it from working. First, the life expectancy’s for people continue to grow and grow…its currently around 80 years old. And second, birth control was introduced, so that the average birth rate in america is 2.1, so the base is barely growing at all. So if you can think of the idea of social security as a triangle, in the 1930’s when it was introduced, the base was much larger then the top. But now a days it more resembles a square, and soon an upsidedown triangle, because MOST people are able to retire and drain social security for AT LEAST 15 years. And there are now LESS people paying into the system. And if that isn’t bad enough, elderly advocate groups have been demanding that the payments of social security be upped to match current wages of workers, not grow along with inflation. So the old people that retired today put a smaller amount of money into the system then they take out, even if you factor in inflation.

    Therefore, I would much rather take the “risk” that i lose my social security in the market then just never getting it at all. While i’m sure a few people will be bilked out of their money, i still feel thats a better investment then the sink-hole that is social security. And further more, bush only is proposing letting us put 2-3% towards private accounts, not the full deal.

    Comment by Phil -

  50. Great points, Mark.

    The problem that many of the other commentors have missed is that it’s not simply an issue of Social Security as it is today v. privatised Social Security; there are other options. When Social Security was begun years ago, the average life expectancy was well below the Social Security payout age; most people didn’t live to see a penny of the money. Today, life expectancies have grown, but the payout age has barely budged.

    If the payout age was adjusted following actuarial tables for a similar proportion of people to be expected to recieve Social Security (could be adjusted every 10 years based on the census) this would solve a large part of the problem.

    Comment by Carter Adler -

  51. All well and good, Mark, but how can private accounts possibly be worse than the status quo? You evaluate Social Security as if it’s a personal account – it’s not. The system will collapse in less than 20 years. People have to save up on their own, regardless of government policy. Nobody who will retire in 20 years can expect the government to bail them out. The government has already proven itself an abject failure in providing “social security”.

    Comment by Danny Taggart -

  52. The way social security is now doesn’t work, and if we stay that current course, it WILL go bankrupt.
    Bush’s plan is to give more of MY money to ME and give ME the responsibility over MY money. Yes, there is risk, but leaving it up to the Government and Congress to look after it hasn’t been working. They have been “borrowing” out of it for years. Also, I think me paying for today’s old people, and the next generation paying for me is a plan destined to fail, and it will sooner than later if kept in it’s current form.
    At least if I have my money, they can steal it to pay for their pet projects and such. That alone makes the plan worth it.
    Take the money away from the politicians (who don’t pay into in the first place, so they have no vested interest in keeping it) and give it to the people.

    I hear so much about how this is so wrong… then if it is, please give me an alternative that will WORK.

    Comment by John -

  53. Privitizing social security. Economists have tell us the that the dollar is sinking because we are running large trade and budget deficits. One reason given is that we are not saving enough. Now this does not take into account investments. So then this leads us to the conclusion that we are suffering from a lack of domestic capital. Guess who the largest consumer of domestic capital is government. So given the this fact the answer is privatize social security and re-inject that capital back into the free market.

    Comment by Randy Shimizu -

  54. I agree with Evan.
    Do you know how elitist the counter argument comes off sounding. I’d prefer having ownership of my future. I’ve seen my grandparents work for 40+ years and contribute to a fund that simply doesn’t meet the bare necessity needs of those from whom the tax was taken.

    Privatization is a fantastic idea, given we are provided full-use rights of those funds.
    By full use, I mean the ability to use those funds to buy a home or invest in oneself or business.

    I am not for false or controlled privatization.
    Then in that circumstance skeptics could have a valid concern.

    Don’t underestimate the average joe… we’re alot smarter than you may think.

    Comment by Jess -

  55. The greatest future risk an individual faces is not investment risk it is a lack of property rights to the money contributed to social security.

    There is nothing “social” or “security” about social security. It is an additional tax that is currently being returned at retirement regardless of your net worth. There is nothing secure about your contributions. You have no right to your contributions. All future payments are at the discretion of politicians.

    Privatization of social security gives you property rights to the contributions. It reduces the very real risks of reduced or canceled future payments. With legal ownership of your contributions we avoid the political risk inherent in social security.

    The con game is the government promoting the idea that you are contributing to your retirement when you pay social security taxes. You have no rights to these funds paid into social security.

    Comment by Evan -

  56. Mark,

    Follow me…

    You have no idea how timely this blog entry is for me personally. I just got off the phone with my dad and my brother-in-law discussing what to do with my 3 Vanguard mutual funds, as well as debating the topic with my wife. I want to do an exchange before the year ends and am unsure which fund to select. Been thinking of cashing out and paying the fine, but I think I’ll keep this amount “in” just to see what happens over the years while I build up my “sweat equity” in finally working for myself. You previously mentioned bonds as a sure bet, which mirrors my philosophy on minimizing risk. I have it narrowed to either a 60-40 and a 40-60 (bond vs. blue chip) fund. (fyi, vanguard’s wellington vs. wellesly)

    But here is my point….

    I’m savvy (so I think…) I have my degrees and I have my finance & math backgrounds, and I can solve tons of physics and calculus problems on one foot. But the choices given to me from Vanguard of funds stirs thoughts of uncertainty and hope, and emotion starts to rear its ugly head. Each fund I consider, I put into the “10 year” performance track (nice website at vandguard, btw), and speculate. Then the questions come: where will interest rates go? Is there really a real estate bubble in SoCal? Will large caps outperform midcaps? My issue of Forbes (2005 Investment Guide) sits beside me, with over 200 pages to thumb through. Here on page 194 is a article called “Russian Roulette Investing”. I go online, to, and see a “poll” on which investements will perform the best in ’05. I start asking, who voted? What do these voters know? How many portfolio managers sent out memos to go and vote on the Forbes website.

    Then I wonder, and even discussed this tonight on the phone with my family (before reading your blog), how can the average worker who used to pay into Social Security make the best decisions for herself? How? After reading Alex Berenson’s The Number I get a sudden chill and wonder how many Enrons are waiting to come out from the soot, and how many people quickly forgot the 70’s…

    Then I laugh at the thought as every american worker decides that the “best” investment is international funds, asian markets, european growing sectors, etc. Is this Social Security? For what Society?

    The Roman Empire is falling…


    Comment by greg -

  57. So many issues, so little time…. The clock is ticking…… It sounds great on the surface but its just a bandaid. It reminds me of some of the attempts to stimulate upside in the $. There’s not much we can do. It’s like trying to alter the water level of an ocean with a water glass.

    Saw a wire story earlier this week and just had to post it on my site ( – its a good one for this area also: A senior Australian Treasury official said that the US is facing an “impossible trinity”. Martin Parkinson, Deputy secretary and head of economics, told a conference that the problems facing the US would limit global economic growth: “It (the US) is fighting a global war on terrorism while becoming dramatically more dependent on foreign financial support at a time when the developed world is ageing. The US will have to take on more of the burden itself, increasing the risk of a disruptive correction.”

    How big is the world’s financial support? Ijn the same piece I posted some analysis of the Q3 capital flows:

    The following statistics illustrate the degree to which foreign capital flows have supported US markets. During the September quarter, foreigners absorbed the equivalent of an extraordinary 97.7% of all Treasury issuance, an even more extraordinary 99.9% of all agency issuance, and 63% of all corporate bond issuance. Combined foreign purchases of Treasuries and agencies came in at an annual rate of $369.3 billion, which equaled almost 99% of total Treasury and agency issuance during the third quarter.

    If those who pay into Social Security get the option to bail out on Uncle Sam who will foot the bill? The foreigners are going to get full pretty soon because they have been pigging out at Uncle Sam’s all you can eat buffett at a rate that cannot continue.

    Comment by Carl Johnson -

  58. I approve of this step towards being able to control my money, unfortunately it’s only an ‘allowance’. I prefer to ask: When will we be allowed to retain all of our hard-earned jack?

    Comment by Jason -

  59. If the USA were to go to an investment/savings system instead of social security, inflation will eat away at investments in such a way to force retirees to only be a small percentage of the total population. If 80 percent of the population is over 65, they cannot all retire because the other 20% of the population cannot provide services to those in retirement, thus the cost of services these retirees wanted, whether it be an automobile or medical care, would rise to force them out of retirement since their savings would no longer be able to provide them with the lifestyle they wanted.

    Comment by runescape money -

  60. Of course that’s all the ivory tower view. The reality is that our politicians often serve themselves more than they serve us. Corruption seems to be endemic to both parties. The individuals and corporations who have the most money seem to control what really happens while most Americans hide their heads in the sand becoming fatter, dumber, and happier.

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  62. First off most people don’t know how our why Social Security was established. It was established to help working people save for the rainy day.

    The fund was doing so well that our politicians decided to borrow the funds to pay off debts they incurred but they never paid it back. Then they decided to expand use of the funds for social programs which gave money to people who never paid into the program and it got out of control so they increased the amount we had to pay each year to cover their give aways. Then they decided that because of their good work the tax payers should pay for their share of their SS benefits. Not only do we pay for them but their retirement benifits a better than ours.

    The SS program is in trouble because of them. Now we have all these so called experts telling us how to save the system and it boils down to us paying more for less.

    Why dont we and the media ask the basic questions of congress and the senate. Stop protectecting yourselves and protect the citizens. My suggestion to boost S.S is to ask the congress and the senate to Vote down all the Ear Mark Pork Barrel benefits they are requesting and put that total amount into the S.S fund. That would prove to their constituents that they trully want to correct the problem. After all did they not pilfer the S.S Fund to pay for the problems that created this mess. Secondly, they should vote to reduce the billions of dollars that they give foreign countries supposedly to enhance our image. Those monies could also be used to save S.S. and reduce our national debt.

    These are only a few ways we can help ourselves. They sound simple but isn’t that what cost cutting is all about? All of us who have been in business, learned the hard way, cut the frills and you are back in business.

    I think that we should start a campaign to force our legislators to give up their PORK BARRELL FUNDS. This is the only way to see how sincere they really are about fixing the problems we are facing.

    A letter writing campaign to all Congress and Senate people as well as the news madia would put the pressure on them. This would let them know we mean business.

    This message should be sent to everyone on the internet to let them know we are not interested in their Pork Barrell funds. We want results

    Comment by Russell J. Cerminaro -

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  64. 1. Everybody who wants control of their retirement funds CAN DO IT RIGHT NOW, tax deferred, yet only 12% of Americans are doing it at an age where it’ll have a real impact on their lives. If most people can’t figure out that they need to save and curb spending or just don’t want to bother, why will it be different with the new private accounts?

    2. The reason some of those vaunted stocks and funds perform so well is because there aren’t millions and millions of people trying to buy them (or being forced to, since now you and only you will be responsible for you well being in retirement). Simple offer and demand. For such enthusiastic proponents of free-market absolutism, you seem to ignore its basic rules.

    3. Yes, it is a tax (after all, all taxes bring you some kind of benefit , be it police, roads or retirement). Yes, it is insurance to prevent large number of destitute seniors or infirm people. I submit that, as such, it’s not a bad investment to make. Are you sure you want to live in a country where people who make poor decisions with their investments are left to fend for themselves? Who do you think they are going to rob?

    Comment by abarreras -

  65. 1- We have models already for the marketization of pension dollars, for example federal employee pensions. People would be limited in where they could invest and the money would thus be protected in the accounts from risky investments and greedy politicians who will spend the money if it comes in as a tax reciept (as they do now!).


    Comment by Theodore -

  66. Here is a link to an article about how Britain’s social security system, which was partly privatized by Margaret Thatcher, is a case study in why this is a bad idea. I’m trying to get as many people to read this as possible. Please pass it on. Thank you.


    A Bloody Mess
    From our February 2005 issue: How has Britain’s privatization scheme worked out? Well, today, they’re looking enviably upon Social Security.
    By Norma Cohen
    Web Exclusive: 01.11.05

    A conservative government sweeps to power for a second term. It views its victory as a mandate to slash the role of the state. In its first term, this policy objective was met by cutting taxes for the wealthy. Its top priority for its second term is tackling what it views as an enduring vestige of socialism: its system of social insurance for the elderly. Declaring the current program unaffordable in 50 years’ time, the administration proposes the privatization of a portion of old-age benefits. In exchange for giving up some future benefits, workers would get a tax rebate to put into an investment account to save for their own retirement.
    George W. Bush’s America in 2005? Think again. The year was 1984, the nation was Britain, the government was that of Margaret Thatcher — and the results have been a disaster that America is about to emulate.

    For all the fanfare that surrounds the Bush administration’s efforts to present a bold new idea on pension reform, the truth is that it is not new at all. In fact, the proposal looks suspiciously like the plan set in train during Thatcher’s first term in 1979 and which has since led Britain to the brink of a crisis. Since then, the nation’s basic pension, which is paid for out of tax receipts, has shrunk dramatically. The United Kingdom has the stingiest state pension program of any G8 nation, and there is growing consensus — even among British conservatives — that reform is needed. And ironically enough, considering that America is on the verge of copying Britain’s mistake, most experts seek reform in the direction of a more generous, and simpler, basic state pension — one similar in design, in other words, to America’s Social Security program……………………………..

    This is the link:

    Here’s a snipped version of the URL:

    Comment by Jeannie -

  67. I am shocked at some of the beliefs I see here.

    1. Social Security ended senior poverty. Sure about that? Show me one senior who can sustain basic living on ss alone. I know plenty of SS recipients. Those who have any comfort is because they ended up with $$ on their own.

    2. SS Trust Fund runs a surplus. What “trust fund”? It is an IOU only and number on paper. Otherwise they wouldn’t have to steal from everyone else to keep from being exposed.

    3. What happened to the promise that no more than 3% would ever be illegaly stolen from our checks? Now it is 7.65% and with the baby boomers retiring will likely become 20 or even 35%. We already pay over half of what we make to government each year. Where will another 20% + come from? So much for the land of the free.

    Speaking of freedom, the real reason for SS is mass population control which is easier when everyone has a tracking (slave) number. Anyone remember yet another previous problem?

    Sorry folks, you can’t have ssocialism and be a free country. It’s one or the other! Bush’s plan is just another side of the same ponzi scam.

    Comment by Vince Iori -

  68. There is still no agreement among experts if privatization is a good or a bad thing. Hopefully as the discussion gets started, more research will be done and several scenarios analyzed. In the meantime, we have found in our analysis

    that privatization will definitely help several sectors of the economy and create new business opportunities.

    Comment by Management Consultant -

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